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Concerns over upstream vanadium supplies provided the backdrop for a burst of trader restocking in Europe and the USA last week, though the Chinese market held on to its premium status despite sharp price increases elsewhere.

Chinese ferro-vanadium and vanadium pentoxide are in tight
hands amid news that local vanadium plants in the major
production hub of Panzhihua, Sichuan province, will have to
halt production while environmental inspections are conducted.

"We have limited material on hand and are reluctant to
sell at this moment as [we] cannot get the cargo from
producers. The production cut [at vanadium pentoxide plants]
will make the situation much worse," a trader told Metal
Bulletin.

V2O5 prices were assessed at $6.40-7 per
lb, fob China, up 3% week-on-week, though European buyers
struggled to get offers from Chinese sellers.

Local ferro-vanadium prices rallied as much as 5% per day
last, week reaching 117,000-118,000 yuan ($17,310- 17,458) per
tonne by Thursday July 20.

China’s domestic V2O5 prices jumped 7% between
July 19 and 20 alone, reaching 110,000 yuan per tonne on July
20 – up 7.3% from the previous day – with
material tight and traders declining to offer from their
limited stocks.

For now, China’s largest vanadium producer,
Pangang, is operating with no disruption at its plants although
forthcoming environmental inspections have created concern over
future supplies.

"We are now running normally with 3,000 tpm of vanadium
pentoxide in our two plants in Panzhihua and Xichang," a
Pangang Group representative told Metal Bulletin.

"However, around 300 tonnes [of V2O5] in Panzhihua area will be
removed from the spot market in the following month when the
plants here are ordered to halt for environmental inspection,"
the spokesman added.

China’s production of vanadium pentoxide has
averaged 7,000-7,200 tpm so far this year, Metal Bulletin
understands.

V2O5 inventories were already tight. Chinese suppliers,
including Chengde Jianlong, which had previously declined to
offer material to export enquiries, are no longer quoting on
domestic enquiries either, the company told Metal Bulletin.

Higher domestic prices mean Chinese vanadium prices continue to
run ahead of the international market and have retained a
premium over prompt spot prices in Europe and the USA.

In Europe, ferro-vanadium prices made only slight moves in June
and the first half of July, trading in a range of $25.70-26.60
per kg delivered duty paid.

"The last few months [of lower prices in Europe] were a
surprise for us, but producers were very aggressive in tenders,
and traders offered lower to compete," a second trader source
said.

European ferro-vanadium prices continued to build on their
earlier gains in the second half of last week, jumping another
6.1%. Metal Bulletin assessed European
ferro-vanadium prices in a range of $28.50-30.50 per kg,
delivered duty-paid in Europe on Friday July 21, up from
$27-28.60 per kg two days earlier.

Trader purchasing made up the bulk of ferro-vanadium buying in
Europe last week, with consumers coming into the market on an
as-required basis and reluctant to buy during the rally.

"Consumers say you’re crazy, check the market,
panic, and then come back and ask you what’s going
on," a third trader said.

But those holding material felt no pressure to sell amid trader
restocking, with all eyes on still higher prices in
China’s domestic and export markets.

"Chinese prices have kicked up another notch, so the gap has
been preserved," the second trader said.

European V2O5 prices were assessed in a
range of $6-6.60 per lb, in-warehouse Rotterdam, on July 21, up
from $5.35-6 per lb previously.

Traders expressed an interest in buying but struggled to find
offers, with others reluctant to do inter-trade business in a
rallying market and keen to hold out for still-higher prices
next week.

Converters, meanwhile, are reluctant to buy given uncertainty
over how ferro-vanadium prices will move during the time
elapsed between purchasing the raw material and conversion,
which can take four weeks.

"It’s going up like a rocket and we
don’t know when it’s going to end,"
the third trader said.

In the USA, ferro-vanadium prices staged a precipitous rise,
taking their cue from the soaring prices in China and Europe,
with suppliers holding back from offering.

US spot prices for ferro-vanadium climbed
to a 33-month high, reaching $12.85-13.25 per lb on July 20, up
8.52% from $11.7-12.35 per lb previously, according to Metal
Bulletin sister publication AMM’s latest
assessment.

Although prices have fallen short of lofty expectations for
much of the year due to a lacklustre spot market demand in the
USA, market participants suspect that the market has reached
the turning point.

"The market has exploded. Anything below $13 would be a very
cheap sale at this point," a supplier source told AMM.

"There is no doubt suppliers have completely pulled back, and
they are showing a lot of discipline in the market today," a
second supplier source said to AMM.

Spot market demand from consumers has been absent from the
market during the price run-up because many have opted to wait
out the market volatility.

"For a consumer, this is the worst time to come out, so they
will hold off as long as they can until the price settles in,"
the first supplier source noted.

But despite the continued dormant spot market demand from
end-users, US suppliers have unanimously elevated offering
prices as overseas prices have risen sharply in response to a
tightening global supply, particularly in China.

"This is what everyone has been talking about for six months
now: a global shortage," a third supplier source said to AMM.

Traders have flooded the market to replenish depleted
inventories and have been met with significantly higher
offering prices.

"Most traders are out of material at this point, leaving only a
handful of suppliers with inventory on hand," the second
supplier source said.

Replacement costs for traders have been prohibitive in recent
months because US prices have been lagging behind regional
prices elsewhere amid illiquidity in the spot market.

"We’ve been saying for a while that prices should
be higher than they have been, and now it’s
finally starting to show up with replacement costs being
factored in," the second supplier source added.

Traders are now finding it difficult to supplement inventories
because overall availability in the USA has thinned out.

"There is a shortage of supply and a lot of traders have been
caught off-guard after selling everything cheap," a fourth
supplier source explained. "Prompt material is tight and all
the people selling in the $11s are now out looking."

As in Europe, market participants were quick to note that US
prices continue to lag behind the global markets despite the
significant move higher.

"In the USA, we have traders galore coming to us from outside
the country trying to buy up any cheap material, some of whom
I’ve never even heard of," a fifth supplier source
said.

While market participants anticipate further pricing upside
ahead within the USA, some expressed concern about the
sustainability of the jump in prices given the
lack of consumer interest.

"It is way too early to tell what legs this price run has.
We’ve seen in the past that these run-ups can be
pretty short lived when it’s based on
environmental inspections over in China," the second supplier
source explained. "We’ll have to wait for a few
consumers to come out to see if these higher prices are here to
stay."